New Bill Bans Pharmacist Gag Orders

Saturday, December 1, 2018

Congress has passed two bills prohibiting “gag clauses” in contracts between pharmacies and insurance companies or pharmacy benefit managers (PBMs). The legislation – one for Medicare and Medicare Advantage beneficiaries and the other for employer-based and individual policies – received widespread bipartisan support in both houses of Congress.

Gag clauses in pharmacy contracts prevent pharmacists from informing patients when the out-of-pocket cost of a prescription drug is the same or lower than what they would pay for the drug through their insurance plan. However, neither piece of legislation requires pharmacists to inform consumers of cheaper options; the patient is responsible for asking about the less-expensive option.

The bill governing commercial insurance plans is effective immediately; the Medicare and Medicare Advantage bill will take effect on January 1, 2020.

Consumer advocates and trade organizations, though supportive of the legislation, predicted that it would have limited impact, emphasizing that while the ban on gag clauses will likely reduce overpayment for pharmaceuticals, it does not address the root cause of high drug costs.

“As a country, we’re spending about $450 billion on prescription drugs annually,” said Steven Knievel of consumer advocacy group Public Citizen in a statement to Kaiser Health News. The money saved by banning gag clauses, he said, “is far short of what needs to happen to actually deliver the relief people need.”

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